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Carefully Avoiding the Penalty Exacted by Res Judicata – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Carefully Avoiding the Penalty Exacted by Res Judicata

The Latin term “res judicata” roughly translates in to English as “the thing having been litigated”. It refers to the important legal doctrine encouraging judicial economy and avoiding a multiplicity of suits on a single legal claim.  Under this doctrine, a particular legal claim is precluded from being brought against certain parties if the claimant has brought the claim against the same parties previously. A recent case from California’s Court of Appeals illustrates the peril litigants may face if they fail to bring and maintain certain cases against all parties against whom a particular claim may be brought.


In DKN Holdings, LLC v. Faerber, Case Nos. E055732, E056294 (4th App. Dist. CA Ct. App 2nd Div 2014) , the appellate court reviewed a trial court ruling preventing a commercial landlord from pursuing a second lawsuit against two of its lessees who had each been parties in a previous lawsuit.  DKN Holdings leased commercial space to three co-lessees in a shopping center in Murietta. Under the terms of the lease, “multiple parties” signing the lease as lessors or lessees “shall have joint and several responsibility” to comply with its terms. In response to a suit brought by one of the lessees against DKN Holdings, the landlord countersued all three co-lessees for unpaid rent and related damages. One of the lessees, Caputo, was served with the counterclaim but the other two, Neel and Faerber, were not.  Eventually DKN Holdings won a $2.8 million damage award against Caputo but, because of the failure to get the other two co-lessees served, the claims against the two other parties were dismissed.


DKN Holdings had the choice to move in that case to add Neel and Faerber as judgment creditors but failed to do so. Instead it subsequently brought a subsequent suit against them for the same monetary damages it sought against Caputo as well as for other damages for breach of an oral indemnity agreement. It is this case which the trial court decided could not go forward because the doctrine of res judicata precludes a second suit against joint and several co-lessees.


The appellate court affirmed that decision noting that the three prerequisites for barring a claim under res judicata were met:


  1. The claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding
  2. The prior proceeding resulted in a final judgment on the merits; i.e., the fact that the claims against the unserved parties were dismissed constituted a “final” judgment
  3. The party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding.


For these reasons the second suit brought by DKN Holdings was barred from proceeding. In the meantime, Faerber sought recovery of attorney’s fees for defending against an improperly-brought civil action. The Court of Appeals affirmed the trial court’s award of over $50,000 in fees against DKN Holdings adding an extra expense to the ultimately futile litigation. DKN Holdings had the opportunity to add the two co-lessees as judgment creditors to the judgment in the first case but, by opting instead to bring a second case imperiled its chance to obtain a judgment against those parties. Now any compensation it recovers can come only from Caputo. If the landlord cannot collect its $2.8 million judgment strictly from that party, it will have undermined its own chance at a full recovery of damages.


The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law.  Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters

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